A lawsuit by a sweepstakes business against Burlington Police Chief Jeffrey Smythe appears headed for trial.

WRWI LLC operated two Internet café businesses in the Burlington city limits before the city began enforcing the state’s ban on Internet sweepstakes — N. Church Street Internet Café Sweepstakes, 1725 N. Church St., and Southwood Internet Café Sweepstakes, 3249 S. Church St. They opened in August 2008 and June 2009, respectively, but closed after former Police Chief Michael Williams sent a letter saying the business was subject to criminal charges and confiscation of equipment.

Smythe was sworn in April 30, 2013, after Williams retired.

The suit claims WRWI’s sweepstakes are legal under the state’s Video Sweepstakes Law and gambling statutes, and asks for an injunction preventing Burlington police from prosecuting them or seizing equipment.

Superior Court Judge Wayne Abernathy heard arguments for summary judgment June 23. He entered an order June 30 denying that motion.

“The Court considered the affidavits, arguments of counsel, applicable statutes and memoranda and cases cited, and concludes there is a genuine issue of material fact,” Abernathy said in the order, which wasn’t available until Monday.

The case was on the trial calendar Monday but was continued indefinitely after both sides requested the court prepare an order specifying which facts remain in dispute for trial. According to that motion, both sides need to know which issues to argue to be able to schedule witnesses for trial.

WRWI is represented by William J. Brian Jr. and Keith P. Anthony of Morningstar Law Group in Morrisville.

THE COMPANY originally brought the lawsuit against the City of Burlington and Smythe last summer, claiming its sweepstakes games are used as a promotional tool for its Internet and office business and don’t violate the state’s Video Sweepstakes Law or N.C. Gambling Statutes.

The suit claims that a letter dated March 20, 2013, from then-chief Williams stating police would enforce the state’s Internet sweepstakes ban constituted intimidation and an “unlawful threat of enforcement, criminal prosecution and the confiscation of WRWI’s property and equipment.” The same letter was sent to most, if not all, sweepstakes businesses operating within the city, the complaint states.

In January 2013, WRWI allegedly invited Williams and other investigators to inspect the equipment and sweepstakes games to see that they didn’t violate state laws.

The company uses the sweepstakes to encourage customers to visit the businesses. Sweepstakes “points” are earned by buying Internet time, free by mail order or free by an in-store request.

Customers use their points to enter sweepstakes and then click a button to see whether they’ve won. They see whether they’ve won regardless of whether they play games. If they decide to play games, those games don’t change the outcome of their sweepstakes entries or chances, the complaint says.

Page 2 of 2 - Williams allegedly never responded to WRWI as to whether he or others thought the business model was illegal.

“Upon information and belief, Police Chief Williams has decided that any promotion Internet sweepstakes … is in violation of the law, as he have [sic] decided not to expend the time necessary to make a case-by-case determination and has decided instead to try to drive WRWI out of business through the use of menacing threats, innuendo and intimidation,” the complaint states.

CLAIMS AGAINST the city eventually were dismissed. Original and subsequent complaints maintain that the city’s privilege license fees against sweepstakes businesses were unlawful. WRWI paid $29,000 in privilege fees to the city in 2012, after the Burlington City Council increased privilege fees to $2,500 for the first computer and $1,000 for each additional computer. The company says it reduced the number of computers at its businesses to decrease overhead.

In responses, the city, through Bateman, claimed it already had refunded WRWI’s fees, along with those to the other sweepstakes businesses. The claim also may now be moot by a new state law that abolishes city privilege license fees starting next July.

Bateman answered and motioned for dismissal of the complaint because WRWI voluntarily closed its businesses. If it had been prosecuted, it could have sought legal recourse through the criminal justice system, Bateman argued.

Further, Bateman argued, Smythe wasn’t named in the complaint beyond his position as police chief.

“Plaintiff does not allege in its Complaint that current Burlington Police Chief Jeffrey Smythe has even contacted it, let alone threatened it or any other Internet sweepstakes or video gaming operator, with arrest or prosecution,” the Nov. 16 motion for dismissal states.

In an affidavit filed June 20, Smythe stated that WRWI voluntarily closed its doors.

“Neither I nor anyone acting at my direction has arrested, attempted to arrest or threatened to arrest” anyone related to WRWI, Smythe states in the document. “At the time WRWI LLC closed its sweepstakes operations in Burlington, no criminal action by the City of Burlington had been undertaken against it or any of its owners, employees, agents, representatives for any action taken by those persons in said capacities.”

The state’s video sweepstakes law makes it illegal for businesses to operate electronic sweepstakes through “an entertaining display” or promote a sweepstakes conducted through the use of such an entertaining display. A first violation is a class 1 misdemeanor. Subsequent violations are class H and class G felonies.

No further hearings or trial dates were scheduled in the suit as of Monday.